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Hutchinson office

530 E. 30th Ave

Hutchinson, KS 67502

Phone: 620-259-6544
Fax: 620-508-2042

Wichita office

9730 E. 50th Street N

Bel Aire, KS 67226

Phone: 316-262-7035
Fax: 316-262-7062

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NON-DISCRIMINATION STATEMENT

 

This institution is an equal opportunity provider and employer. If you wish to file a Civil Rights program complaint of discrimination, complete the USDA Program Discrimination Complaint Form, found online at www.ascr.usda.gov/complaint_filing_cust.html, or at any USDA office, or call (866) 632-9992 to request the form. You may also write a letter containing all of the information requested in the form. Send your completed complaint form or letter to us by mail at U.S. Department of Agriculture, Director, Office of Adjudication, 1400 Independence Avenue, S.W., Washington, D.C. 20250-9410, by fax (202) 690-7442 or email at program.intake@usda.gov

© 2019  South Central Kansas Economic Development District SCKEDD

Brian's Story

SBA 504 Loan

Borrower's Guide

Brian's story is an example of a successful SBA 504 loan. Even though your story may not exactly match Brian's, your project may still be a good fit for an SBA 504 loan. 

 

Brian had built his business to the point that his team had outgrown their current facility and he was looking for a new office/warehouse location.

 

The challenge was that he was growing so rapidly, his business was trying to preserve cash. If he secured a loan he needed both a low down payment and a low-interest rate to stay as liquid as possible.

 

Brian approached his local bank to seek funding to purchase a nearby office/warehouse building. Brian’s lender reached out to SCKEDD – a local non-profit lender – and asked them to look at backing the project with an SBA 504 loan. Brian began working with the bank to get the loan to SCKEDD to package and send to the SBA. Brian was approved for an SBA 504 loan that allowed him to purchase and renovate his new business location.

 

To keep his business on the path to success, Brian meets a few times per year with his banker and the team at SCKEDD.

SBA 504  - Borrower’s guide

 

THE PROCESS for an SBA 504 LOAN

  1. You go to the bank for a loan and lender recognizes if SBA 504 loan is a good fit and calls SCKEDD to determine if the project is eligible.

  2. Once the loan is approved by the bank, the bank sends the loan to SCKEDD so we can begin the underwriting process.

  3. When the loan package is complete and approved by our Loan Review Committee, we submit it to SBA.

  4. If SBA approves the loan, our team assists you, the borrower, for the life of the loan.

 

Commercial real estate

For commercial real estate you may consider an SBA 504 loan. SBA 504 Loan provides business owners with up to $5 million for purchasing real estate and equipment. This popular program features a significant lower down payment, long-term fixed rates, and lower fees than the SBA 7 (a) loan program. If you are buying, constructing, renovating a building, or purchasing heavy machinery or equipment, the SBA 504 loan program may be idea for your business needs.

SBA 504 loan advantages

Low down payments

 

SBA 504 loans provide an opportunity to provide a smaller down payment. This allows your business to conserve working capital to grow your business.

Interest Rates Below Conventional Loan Rates

 

The SBA 504 loan has low interest rates that vary based on market forces. The actual interest rate that the borrower will pay is calculated based on the debenture rate for the month the loan is funded. SBA 504 loans are funded by monthly bond (debenture) sales to investors on Wall Street.

Fixed Interest Rates

 

Fixed interest rates help with budgeting. The SBA 504 loan program offers a fixed rate for 10 to 25 years on real estate and long-term equipment, based on the useful life of the equipment.

ELIGIBLE USES

Qualified borrowers can use SBA 504 loans to

  • Buy, build or renovate commercial real estate

  • Purchase machinery or equipment

  • Refinance debt for commercial estate and equipment

 

REQUIREMENTS

What are the requirements for an SBA 504 loan? You may qualify if you and your business meet the following criteria

  • The business is for-profit

  • The business is in the state of Kansas

  • The business is valued at less than $15 million and the business has an after-tax profit of less than $5 million a year over the average of two years

  • The business owner will occupy 51% or more of commercial real estate that is being renovated or purchased

  • The business owner will occupy 60% or more of commercial real estate that is being built

  • Individuals that own 20% or more of the business are willing to act as personal guarantors

  • The business owner can meet the down payment requirements

 

Down payment requirements

 

You can expect to put down 10% to 20% of the project on average. The balance is often financed in part by a bank, up to 50% of the total loan, and in part by SCKEDD, up to 30 to 40% of the total loan.

RATES AND FEES

 

Interest rates

Interest rates for the Small Business Administration 504 loan program are set one time per month with a bond sale. They are FIXED for the life of the loan and fully amortized.

Fees

There are generally four fees a small business borrower will pay for this loan

  1. A one-time origination fee of 2.65% of the SBA 504 portion of the loan

  2. A one-time bank participation fee of 0.5% of the bank’s loan amount

  3. Attorney closing costs of $2,500

  4. Recording and title costs - typically financed as part of the loan

 

Interested in learning more?